fp0001198_ex4-1.htm


     

    Exhibit
4.1

     

    SECOND
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

     

    This SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of
December 11, 2009, is by and among Workstream Inc., a corporation existing
pursuant to the Canada Business Corporations Act with headquarters located at
495 March Road, Suite 300, Ottawa, Ontario K2K 3G1, Canada (the “Company”), and the undersigned
buyers (each, a “Buyer”,
and collectively, the “Buyers”).

     

    RECITALS

     

    A.           The
Company and the Buyers entered into that certain Transaction Agreement, dated as
of July 25, 2007 (the “Existing Transaction
Agreement”).

     

    B.           Simultaneously
with the consummation of the transactions contemplated by the Existing
Transaction Agreement, the Company issued and sold to each Buyer (i) a Special
Warrant (as defined in the Existing Transaction Agreement) which is convertible
into Conversion Shares (as defined in the Existing Transaction Agreement) in
accordance with the terms thereof and (ii) a Warrant (as defined in the Existing
Transaction Agreement) which is exercisable to purchase Warrant Shares (as
defined in the Existing Transaction Agreement) in accordance with the terms
thereof.

     

    C.           Simultaneously
with the consummation of the transactions contemplated by the Existing
Transaction Agreement, the Company and the Buyers executed and delivered the
Registration Rights Agreement, dated as of August 3, 2007, and as amended and
restated in its entirety on August 29, 2008 (the “Existing Registration Rights
Agreement”), pursuant to which the Company agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the “1933 Act”), and the rules and
regulations promulgated thereunder, and applicable state securities
laws.

     

    D.           In
connection with the consummation of the transactions contemplated under the
Exchange Agreements (as defined below), the Company agreed to provide amended
registration rights under the 1933 Act and applicable state securities laws with
respect to the Registrable Securities (as defined below).

     

    AGREEMENT

     

    NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each of the Buyers hereby agree to amend
and restate the Existing Registration Rights Agreement in its entirety as
follows:

     

    
      	
              1.  

            	
              Definitions.

            


    

     

    Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Transaction Agreement (as defined below). As used in
this Agreement, the following terms shall have the following
meanings:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (a)  “2008 Exchange Agreements” means,
collectively, the separate exchange agreements, each dated as of August 29,
2008, entered into between the Company and each of the Buyers.

     

    (b)  “Business Day” means any day
other than Saturday, Sunday or any other day on which commercial banks in
Chicago, Illinois are authorized or required by law to remain
closed.

     

    (c)  “Conversion Shares” means,
collectively, the Common Shares issuable upon conversion of the Convertible
Notes.

     

    (d)  “Convertible Notes” means,
collectively, the senior secured convertible notes issued pursuant to the
Exchange Agreements.

     

    (e)  “Effective Date” means the date
that the applicable Registration Statement has been declared effective by the
SEC.

     

    (f)  “Effectiveness Deadline” means
(i) with respect to the initial Registration Statement required to be filed to
cover the resale by the Investors of the Registrable Securities the 100th
calendar day after the Trigger Date (or the 130th
calendar day after the Trigger Date in the event that such Registration
Statement is subject to review by the SEC) and (b) with respect to any
additional Registration Statements that may be required to be filed by the
Company pursuant to this Agreement, the 100th
calendar day following the date on which the Company was required to file such
additional Registration Statement (or the 130th
calendar day after such date in the event that such Registration Statement is
subject to review by the SEC).

     

    (g)  “Exchange Agreements” means,
collectively, the separate Exchange Agreements, each dated as of December 11,
2009, entered into between the Company and each of the Buyers.

     

    (h)  “Filing Deadline” means (i)
with respect to the initial Registration Statement required to be filed to cover
the resale by the Investors of the Registrable Securities, the 40th
calendar day after the Trigger Date and (ii) with respect to any additional
Registration Statements that may be required to be filed by the Company pursuant
to this Agreement, the date on which the Company was required to file such
additional Registration Statement pursuant to the terms of this
Agreement.

     

    (i)  “Investor” means a Buyer or any
transferee or assignee of any Registrable Securities,
Convertible Notes or 2008 Warrants (as defined in the Exchange Agreements), as
applicable, to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or
assignee thereof to whom a transferee or assignee of any Registrable Securities,
Convertible Notes or 2008 Warrants, as applicable, assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.

     

    (j)  “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.

     

    
      
        
        

      

      
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    (k)  “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 and the declaration of effectiveness of such Registration Statement(s)
by the SEC.

     

    (l)  “Registrable Securities” means
(i) the Conversion Shares issued or issuable upon conversion of the
Convertible Notes, (ii) the 2008 Warrant Shares (as defined in the 2008
Exchange Agreements) issued or issuable upon exercise of the 2008 Warrants (as
defined in the Exchange Agreements) and (iii) any capital stock of the Company
issued or issuable with respect to the Conversion Shares, the 2008 Warrant
Shares, the Convertible Notes or the 2008 Warrants, including, without
limitation, (1) as a result of any share split, share dividend,
recapitalization, exchange or similar event or otherwise and (2) shares of
capital stock of the Company into which the Common Shares (as defined in the
Exchange Agreements) are converted or exchanged and shares of capital stock of a
Successor Entity (as defined in the Convertible Notes and 2008 Warrants) into
which the Common Shares are converted or exchanged, in each case, without regard
to any limitations on conversion of the Convertible Notes or exercise of the
2008 Warrants.

     

    (m)  “Registration Statement” means
a registration statement or registration statements of the Company filed under
the 1933 Act covering the Registrable Securities.

     

    (n)  “Required Holders” means the
holders of at least a majority of the Registrable Securities.

     

    (o)  “Required Registration Amount”
means the sum of (i) the maximum number of Conversion Shares issued and issuable
pursuant to the Convertible Notes and (ii) the maximum number of 2008 Warrant
Shares issued and issuable pursuant to the 2008 Warrants, in each case, as of
the Trading Day (as defined in the 2008 Warrants) immediately preceding the
applicable date of determination (without taking into account any limitations on
conversion of the Convertible Notes set forth therein or exercise of the 2008
Warrants set forth therein), all subject to adjustment as provided in Section
2(d).

     

    (p)  “Rule 144” means Rule 144
promulgated by the SEC under the 1933 Act or any other similar or successor rule
or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration.

     

    (q)  “Rule 415” means Rule 415
promulgated by the SEC under the 1933 Act or any successor rule providing for
offering securities on a continuous or delayed basis.

     

    (r)  “SEC” means the United States
Securities and Exchange Commission.

     

    (s)  “Transaction Agreement” means
the Existing Transaction Agreement, as amended and modified by the 2008 Exchange
Agreements and the Exchange Agreements.

     

    (t)  “Trigger Date” means the first date on
which any of the Investors are unable to sell any Registrable Securities without
restriction under Rule 144 (including, without limitation, volume restrictions),
except as a result of any Investor becoming an “affiliate” (as such term is
defined under Rule 144(a)(1)) of the Company.

     

    
      
        
        

      

      
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              2.  

            	
              Registration.

            


    

     

    (a)  Mandatory
Registration. Commencing on the Trigger Date, the Company shall prepare,
and, as soon as practicable, but in no event later than the Filing Deadline,
file with the SEC a Registration Statement on Form S-3 covering the resale of
all of the Registrable Securities. In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration and reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(c). The Registration Statement prepared pursuant
hereto shall register for resale at least the number of Common Shares equal to
the Required Registration Amount as of the date such Registration Statement is
initially filed with the SEC. The Registration Statement shall contain (except
if otherwise directed by the Required Holders) the “Selling Shareholders”
and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit
B; provided that the Company may make any changes to such sections as
requested by the SEC so long as none of such changes are materially inconsistent
with the form attached hereto as Exhibit
B or
adversely affect any Investor (including, without limitation, any restrictions
on the manner of disposition). The Company shall use its commercially reasonable
efforts to have such Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the applicable Effectiveness
Deadline.  By 9:30 a.m. (New York City time) on the Business Day
immediately following the Effective Date of the applicable Registration
Statement, the Company shall file with the SEC in accordance with Rule 424 under
the 1933 Act the final prospectus to be used in connection with sales pursuant
to such Registration Statement. Notwithstanding anything to the contrary
contained in this Agreement, other than during an Allowable Grace Period, the
Company shall ensure that, when filed and at all times while effective, each
Registration Statement and the prospectus used in connection with such
Registration Statement will disclose (whether directly or through incorporation
by reference to other SEC filings to the extent permitted) all material
information regarding the Company and its securities. In no event shall the
Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders. The Company shall not after the date hereof until the Effective Date of
the Registration Statement required to be filed pursuant to this Section 2(a)
enter into any agreement providing any such right to any of its security
holders.

     

    (b)  Legal Counsel.
Magnetar Capital Master Fund, Ltd shall have the right to select its own legal
counsel to review and oversee, solely on its behalf, any registration pursuant
to this Section 2 (“Legal
Counsel”), which shall be Greenberg Traurig, LLP or such other counsel as
thereafter designated by Magnetar Capital Master Fund, Ltd.

     

    (c)  Ineligibility for Form
S-3. In the event that Form S-3 is not available for the registration of
the resale of Registrable Securities hereunder, the Company shall (i) register
the resale of the Registrable Securities on another appropriate form reasonably
acceptable to the Required Holders and (ii) undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.

     

    
      
        
        

      

      
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    (d)  Sufficient Number of Shares
Registered. In the event the number of shares available under a
Registration Statement filed pursuant to Section 2(a) is insufficient to cover
the resale of all of the Registrable Securities required to be covered by such
Registration Statement, the Company shall amend the applicable Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the Trading Day immediately preceding the date of the
filing of such amendment or new Registration Statement, in each case, as soon as
practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises. The Company shall use its commercially reasonable
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.  For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed “insufficient to cover all of the
Registrable Securities” if at any time the number of Common Shares available for
resale under the Registration Statement is less than the product determined by
multiplying (i) the Required Registration Amount as of such time by (ii) 0.90.
The calculation set forth in the foregoing sentence shall be made without regard
to any limitations on (i) conversion of the Convertible Notes (and such
calculation shall assume that the Convertible Notes are then fully convertible
at the then prevailing applicable Conversion Prices (as defined in the
Convertible Notes) and (ii) exercise of the 2008 Warrants (and such calculation
shall assume that the 2008 Warrants are then fully exercisable at the then
prevailing applicable Exercise Price (as defined in the 2008
Warrants).

     

    (e)  Effect of Failure to File
and Obtain and Maintain Effectiveness of Registration
Statement.  If (i) a Registration Statement covering the resale
of all of the Registrable Securities required to be covered thereby and required
to be filed by the Company pursuant to this Agreement is (A) not filed with the
SEC on or before the Filing Deadline (a “Filing Failure”) (it being
understood that if the Company files a Registration Statement without affording
each Investor the opportunity to review and comment on the same as required by
Section 3(c) hereof, the Company shall not be deemed to have satisfied this
clause (i)(A) and such event shall be deemed to be a Filing Failure); or (B) not
declared effective by the SEC on or before the applicable Effectiveness Deadline
(an “Effectiveness
Failure”) (it being understood that if on the Business Day immediately
following the Effective Date the Company shall not have filed a “final”
prospectus for such Registration Statement with the SEC under Rule 424(b) in
accordance with Section 2(a) above (whether or not such a prospectus is
technically required by such rule), the Company shall not be deemed to have
satisfied this clause (i)(B) and such event shall be deemed to be an
Effectiveness Failure); (ii) on any day after the Effective Date of such
Registration Statement sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r)) pursuant to such
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, a
suspension or delisting of (or a failure to timely list) the Common Shares on
its principal trading market or exchange, or to register a sufficient number of
Common Shares) (a “Maintenance
Failure”) (provided that if an Investor transfers its rights hereunder
pursuant to Section 9 and the transferee requests inclusion in such Registration
Statement which requires the Company under applicable law to file a
post-effective amendment to such Registration Statement, then a Maintenance
Failure shall not be deemed to have occurred solely with respect to the filing
of such post-effective amendment only if the Company is using its commercially
reasonable efforts to file such amendment and have such amendment declared
effective as soon as practicable); or (iii) the Company fails to file with the
SEC any required reports under Section 13 or 15(d) of the 1934 Act such that it
is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) (a
“Current Public Information
Failure”) as a result of which any of the Investors are unable to sell
any Registrable Securities without restriction under Rule 144 (including,
without limitation, volume restrictions), then, as partial relief for the
damages to any holder by reason of any such delay in or reduction of its ability
to sell the underlying Common Shares (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Registrable Securities relating to such Registration Statement an
amount in cash equal to one percent (1%) of the then-outstanding aggregate
principal amounts of such Investor’s Convertible Notes (as defined in the
applicable Exchange Agreement) (1) on the date of such Filing Failure,
Effectiveness Failure, Maintenance Failure or Current Public Information
Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a
Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure
until such Effectiveness Failure is cured; (III) a Maintenance Failure until
such Maintenance Failure is cured; and (IV) a Current Public Information Failure
until the earlier of (i) the date such Current Public Information Failure is
cured and (ii) such time that such public information is no longer required
pursuant to Rule 144 (in each case, pro rated for periods totaling less than
thirty (30) days). The payments to which a holder shall be entitled pursuant to
this Section 2(e) are referred to herein as “Registration Delay Payments.”
Following the initial Registration Delay Payment for any particular event or
failure (which shall be paid on the date of such event or failure, as set forth
above), without limiting the foregoing, if an event or failure giving rise to
the Registration Delay Payments is cured prior to any thirtieth (30th) day
anniversary of such event or failure, then such Registration Delay Payment shall
be made on the third (3rd)
Business Day after such cure. Notwithstanding anything contained in this Section
2(e) to the contrary, in no event shall the Registration Delay Payments exceed
$5,000,000 in the aggregate.

     

    
      
        
        

      

      
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    (f)  Offering.
Notwithstanding anything to the contrary contained in this Agreement, but
subject to the payment of the Registration Delay Payments pursuant to Section
2(e), in the event the staff of the SEC (the “Staff”) or the SEC seeks to
characterize any offering pursuant to a Registration Statement filed
pursuant to this Agreement as constituting an offering of securities by or
on behalf of the Company, or in any other manner, such that the Staff
or the SEC do not permit such Registration Statement to become
effective and used for resales in a manner that does not constitute such an
offering and that permits the continuous resale at the market by the Investors
participating therein (or as otherwise may be acceptable to each
Investor) without being named therein as an “underwriter,” then the Company
shall reduce the number of shares to be included in such Registration Statement
by all Investors until such time as the Staff and the SEC shall so permit
such Registration Statement to become effective as aforesaid.  In making
such reduction, the Company shall reduce the number of shares to be included by
all Investors on a pro rata basis (based upon the number of Registrable
Securities otherwise required to be included for each Investor) unless the
inclusion of shares by a particular Investor or a particular set of Investors
are resulting in the Staff or the SEC’s “by or on behalf of the Company”
offering position, in which event the shares held by such Investor or set of
Investors shall be the only shares subject to reduction (and if by a set of
Investors on a pro rata basis by such Investors or on such other basis as would
result in the exclusion of the least number of shares by all such
Investors).  In addition, in the event that the Staff or the SEC requires
any Investor seeking to sell securities under a Registration Statement
filed pursuant to this Agreement to be specifically identified as
an “underwriter” in order to permit such Registration Statement to
become effective, and such Investor does not consent to being so named as an
underwriter in such Registration Statement, then, in each such case, the
Company shall reduce the total number of Registrable Securities to be
registered on behalf of such Investor, until such time as the
Staff or the SEC does not require such identification or until such Investor
accepts such identification and the manner thereof. Any reduction pursuant
to this paragraph will first reduce all Registrable Securities other than
those issued pursuant to the Exchange Agreements and the 2008 Exchange
Agreements. In the event of any reduction in Registrable Securities
pursuant to this paragraph, an affected Investor shall have the right to
require, upon delivery of a written request to the Company signed by such
Investor, the Company to file a registration statement within 30 days of such
request (subject to any restrictions imposed by Rule 415 or required by
the Staff or the SEC) for resale by such Investor in a manner reasonably
acceptable to such Investor, and the Company shall following such
request cause to be and keep effective such registration statement in the
same manner as otherwise contemplated in this Agreement
for registration statements hereunder, in each case until such time as: (i)
all Registrable Securities held by such Investor have been registered and
sold pursuant to an effective Registration Statement in a manner acceptable to
such Investor or (ii) all Registrable Securities may be resold by such
Investor without restriction (including volume limitations) pursuant to
Rule 144 without the need for current public information required by Rule
144(c)(1) (or Rule 144(i)(2), if applicable) or (iii) such Investor agrees to be
named as an underwriter in any such Registration Statement in a manner
acceptable to such Investor as to all Registrable Securities held by such
Investor and that have not theretofore been included in a Registration Statement
under this Agreement (it being understood that the special demand right under
this sentence may be exercised by an Investor multiple times and with respect to
limited amounts of Registrable Securities in order to permit the resale thereof
by such Investor as contemplated above).

     

    
      
        
        

      

      
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    (g)  Piggyback
Registrations. If, at any time during the period in which a Registration
Statement is required to be kept effective, there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its equity securities (other than on Form S-4 or
Form S-8 (each as promulgated under the 1933 Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with the Company’s stock option or other employee benefit plans),
then the Company shall deliver to each Investor a written notice of such
determination and, if within fifteen (15) days after the date of the delivery of
such notice, any such Investor shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Investor requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 2(g) that are eligible for resale pursuant to Rule 144 (without
volume restrictions) and without the requirement to be in compliance with Rule
144(c)(1) (or Rule 144(i)(2), if applicable) or that are the subject of a then
effective Registration Statement. Any Registrable Securities of an Investor that
are to be included in a registered public offering pursuant to this Section 2(g)
shall be offered and sold upon such terms as the managing underwriters thereof
determine. The managing underwriters may condition an Investor’s participation
in such a registered public offering upon such Investor’s execution of an
underwriting agreement containing customary terms and conditions which would
customarily be applicable to selling shareholders.  If the managing
underwriters for a registered public offering determine that the number of
Common Shares proposed to be sold in such offering would adversely affect the
marketing of the Common Shares to be sold by the Company therein or by the
Person or Persons who exercised their right to require the Company to register
such offering under the 1933 Act, then the number of Common Shares to be
included in such offering shall be reduced until the number of such shares does
not exceed the number that the managing underwriters believe can be sold without
any such adverse effects; provided that any shares to be excluded shall be so
excluded in the following order of priority: (i) securities held by any Person
or Persons other than (A) the Investors or (B) any Person or Persons who
exercised their demand right to require the Company to register such offering
under the 1933 Act; (ii) securities to be registered on behalf of the Company,
if any, if such registered offering was initiated by any Person or Persons
exercising their demand right to require the Company to register such offering
under the 1933 Act and (iii) the Registrable Securities sought to be included by
the Investors as determined on a pro-rata basis (based upon the aggregate number
of Registrable Securities sought to be included in such registered
offering).

     

    
      
        
        

      

      
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              3.  

            	
              Related
      Obligations.

            


    

     

    The
Company will use its commercially reasonable efforts to effect the registration
of the Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have the following
obligations:

     

    (a)  Commencing
on the Trigger Date, the Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the Filing Deadline) and use its commercially reasonable
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). Subject to allowable Grace
Periods (as defined below), the Company shall keep each Registration Statement
effective pursuant to Rule 415 for sale on a continuous basis in an
at-the-market offering at all times until the earlier of (i) the date as of
which all of the Investors may sell all of the Registrable Securities required
to be covered by such Registration Statement without restriction pursuant to
Rule 144 without the need for current public information required by Rule
144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the
Investors shall have sold all of the Registrable Securities covered by such
Registration Statement (the “Registration Period”). The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.  The Company shall submit to the SEC, within two (2)
Business Days after the later of the date that (i) the Company learns that no
review of a particular Registration Statement will be made by the Staff or that
the Staff has no further comments on a particular Registration Statement (as the
case may be) and (ii) the approval of Legal Counsel is obtained pursuant to
Section 3(c) (which approval shall be immediately sought), a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request.

     

    (b)  Subject
to Section 3(r) of this Agreement, the Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company required to be covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of.  In the case of amendments and
supplements to a Registration Statement which are required to be filed pursuant
to this Agreement (including pursuant to this Section 3(b)) by reason of the
Company filing a report on Form 10-Q or Form 10-K or any analogous report under
the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

     

    
      
        
        

      

      
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    (c)  The
Company shall (A) permit Legal Counsel and legal counsel for each other Investor
to review and comment upon (i) each Registration Statement at least five (5)
Business Days prior to its filing with the SEC and (ii) all amendments and
supplements to all Registration Statements (except for Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any
similar or successor reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel or any legal counsel for any
other Investor reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which
approval shall not be unreasonably withheld.  The Company shall
furnish to Legal Counsel and legal counsel for each other Investor, without
charge, (i) copies of any correspondence from the SEC or the Staff to the
Company or its representatives relating to any Registration Statement, provided that such
correspondence shall not contain any material, non-public information regarding
the Company or any of its Subsidiaries (as defined in the Exchange Agreements),
(ii) promptly after the same is prepared and filed with the SEC, one (1)
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one (1) copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel and legal
counsel for each other Investor in performing the Company’s obligations pursuant
to this Section 3.

     

    (d)  The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) promptly after the same is
prepared and filed with the SEC, at least one (1) copy of any Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request
from time to time) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (e)  The
Company shall use its commercially reasonable efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or “blue sky” laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (x) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction.  The Company shall promptly notify
Legal Counsel, legal counsel for each other Investor and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.

     

    (f)  The
Company shall notify Legal Counsel, legal counsel for each other Investor and
each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading (provided that in no
event shall such notice contain any material, non-public information regarding
the Company or any of its Subsidiaries), and, subject to Section 3(r), promptly
prepare a supplement or amendment to such Registration Statement to correct such
untrue statement or omission and deliver ten (10) copies of such supplement or
amendment to Legal Counsel, legal counsel for each other Investor and each
Investor (or such other number of copies as Legal Counsel, legal counsel for
each other Investor or such Investor may reasonably request). The Company shall
also promptly notify Legal Counsel, legal counsel for each other Investor and
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel, legal counsel for each other
Investor and each Investor by facsimile or e-mail on the same day of such
effectiveness and by overnight mail), and when the Company receives written
notice from the SEC that a Registration Statement or any post-effective
amendment will be reviewed by the SEC, (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate.

     

    (g)  The
Company shall use its commercially reasonable efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel, legal counsel for each other Investor and
each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (h)  If any
Investor may be required under applicable securities law to be described in a
Registration Statement as an underwriter and such Investor consents to so being
named an underwriter, at the request of any Investor, the Company shall furnish
to such Investor, on the date of the effectiveness of such Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company’s independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the Investors, and (ii) an opinion, dated as of
such date, of counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the Investors.

     

    (i)  If any
Investor may be required under applicable securities law to be described in a
Registration Statement as an underwriter and such Investor consents to so being
named an underwriter, upon the written request of such Investor, the Company
shall make available for inspection by (i) such Investor, (ii) legal counsel for
such Investor and (iii) one (1) firm of accountants or other agents retained by
such Investor (collectively, the “Inspectors”), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree in
writing to hold in strict confidence and not to make any disclosure (except to
such Investor) or use of any Record or other information which the Company’s
Board of Directors determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this Agreement or any other Transaction
Document (as defined in the Convertible Notes). Such Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and such Investor, if any) shall
be deemed to limit any Investor’s ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and
regulations.

     

    (j)  The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
to be disclosed in the Registration Statement pursuant to the 1933 Act, (iii)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
Transaction Document. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at the
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (k)  Without
limiting any obligation of the Company under each of the Exchange Agreements,
the Company shall use its commercially reasonable efforts either to (i) cause
all of the Registrable Securities covered by a Registration Statement to be
listed or quoted on each securities exchange or quotation system on which
securities of the same class or series issued by the Company are then listed or
quoted, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange or quotation system, or (ii) secure designation
and quotation of all of the Registrable Securities covered by a Registration
Statement on the OTC Bulletin Board, or (iii) if, despite the Company’s best
efforts to satisfy the preceding clauses (i) or (ii) the Company is unsuccessful
in satisfying the preceding clauses (i) or (ii), without limiting the generality
of the foregoing, to use its commercially reasonable efforts to arrange for at
least two market makers to register with the Financial Industry Regulatory
Authority (f/k/a the National Association of Securities Dealers, Inc.) as such
with respect to such Registrable Securities. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section
3(k).

     

    (l)  The
Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts (as the case may
be) as the Investors may reasonably request from time to time and registered in
such names as the Investors may request.

     

    (m)  If
requested by an Investor, the Company shall as soon as practicable after receipt
of notice from such Investor and subject to Section 3(r) hereof, (i) incorporate
in a prospectus supplement or post-effective amendment such information as an
Investor reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) make
all required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make amendments
to any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

     

    (n)  The
Company shall use its commercially reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (o)  The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of the Registration
Statement.

     

    (p)  The
Company shall otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC in connection with any registration
hereunder.

     

    (q)  Within
one (1) Business Day after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.

     

    (r)  Notwithstanding
anything to the contrary herein (but subject to the last sentence of this
Section 3(r)), at any time after the Effective Date of the applicable
Registration Statement, the Company may delay the disclosure of material,
non-public information concerning the Company or any of its Subsidiaries the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company, in the best interest of the Company and, in the
opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the
Company shall promptly (i) notify the Investors in writing of the existence of
material, non-public information giving rise to a Grace Period (provided that in each
notice the Company will not disclose the content of such material, non-public
information to the Investors) and the date on which the Grace Period will begin,
and (ii) notify the Investors in writing of the date on which the Grace
Period ends; and, provided further,
that no Grace Period shall exceed ten (10) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of thirty (30) days and the first day of any Grace Period must be at
least five (5) Trading Days after the last day of any prior Grace Period (each,
an “Allowable Grace
Period”); provided, that no
Allowable Grace Period may exist during the first sixty (60) Business Days after
the Effective Date of the applicable Registration Statement.  For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred to
in clause (i) and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred to in such
notice. The provisions of Section 3(g) hereof shall not be applicable during the
period of any Allowable Grace Period. Upon expiration of each Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, nonpublic
information is no longer applicable.

     

    (s)  The
Company shall use its commercially reasonable efforts to maintain eligibility
for use of Form S-3 (or any successor form thereto) for the registration of the
resale of the Registrable Securities.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
              4.  

            	
              Obligations of the
      Investors.

            


    

     

    (a)  At least
five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the
information the Company requires from each such Investor. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it,
as shall be reasonably required to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably
request.

     

    (b)  Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.

     

    (c)  Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of Section 3(f) or receipt of notice that no supplement or amendment is
required.

     

    (d)  Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement.

     

    (e)  Each
Investor covenants and agrees to deliver a Registration Statement Questionnaire,
in the form attached hereto as Exhibit
C, no later than 15 calendar days after the Trigger Date (such later
date, the “Outside Delivery
Date”); provided that if such Investor fails to deliver such
questionnaire by the close of business on the Outside Delivery Date, then such
Investor’s Registrable Securities may be excluded from the Registration
Statement by the Company.

     

    
      	
              5.  

            	
              Expenses of
      Registration.

            


    

     

    All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company. Each Buyer shall be
responsible for the fees and disbursements of its own legal counsel in
connection with registration, filing or qualification pursuant to Sections 2 and
3 of this Agreement.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	
              6.  

            	
              Indemnification.

            


    

     

    In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:

     

    (a)  To the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified
Person”), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several, (collectively, “Claims”) incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, “Violations”). Subject to
Section 6(b), the Company shall reimburse the Indemnified Persons, promptly as
such expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of such
Registration Statement or any such amendment thereof or supplement thereto and
(ii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company (to the extent applicable), including a corrected
prospectus, if such prospectus or corrected prospectus was timely made available
by the Company pursuant to Section 3(d) and then only if, and to the extent
that, following the receipt of the corrected prospectus no grounds for such
Claim would have existed; and (iii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of any of the Registrable Securities by any of the Investors
pursuant to Section 9.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    (b)  In
connection with any Registration Statement in which an Investor is
participating, such Investor agrees to severally and not jointly indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in Section 6(a), the Company, each of its directors, each of its officers who
signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case, to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(b), such Investor will reimburse any legal or other expenses
reasonably incurred by an Indemnified Party in connection with investigating or
defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld or delayed; provided, further, however, that such
Investor shall be liable under this Section 6(b) for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of any of the Registrable Securities by any of the
Investors pursuant to Section 9.

     

    (c)  Promptly
after receipt by an Indemnified Person or Indemnified Party (as the case may be)
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim
in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party (as the case may be); provided, however, that an
Indemnified Person or Indemnified Party (as the case may be) shall have the
right to retain its own counsel with the fees and expenses of such counsel to be
paid by the indemnifying party if: (i) the indemnifying party has agreed in
writing to pay such fees and expenses; (ii) the indemnifying party shall have
failed promptly to assume the defense of such Claim and to employ counsel
reasonably satisfactory to such Indemnified Person or Indemnified Party (as the
case may be) in any such Claim; or (iii) the named parties to any such Claim
(including any impleaded parties) include both such Indemnified Person or
Indemnified Party (as the case may be) and the indemnifying party, and such
Indemnified Person or such Indemnified Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the
same counsel were to represent such Indemnified Person or such Indemnified Party
and the indemnifying party (in which case, if such Indemnified Person or such
Indemnified Party (as the case may be) notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, then the indemnifying party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party, provided further,
that in the case of clause (iii) above the indemnifying party shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for such Indemnified Person or Indemnified Party (as the case may
be). The Indemnified Party or Indemnified Person (as the case may be) shall
reasonably cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person (as the case may be) which relates
to such action or Claim. The indemnifying party shall keep the Indemnified Party
or Indemnified Person (as the case may be) reasonably apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person (as the case may be), consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person (as the case may be) of a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person (as the case may be) with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party (as the case may be) under this Section 6, except to the extent that the
indemnifying party is materially and adversely prejudiced in its ability to
defend such action.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (d)  No Person
involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to indemnification from any Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation.

     

    (e)  The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.

     

    (f)  The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

     

    
      	
              7.  

            	
              Contribution.

            


    

     

    To the
extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
of this Agreement, (ii) no Person involved in the sale of Registrable Securities
which Person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement. Notwithstanding the provisions of this
Section 7, no Investor shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the net proceeds actually received by
such Investor from the sale of the Registrable Securities subject to the Claim
exceeds the amount of any damages that such Investor has otherwise been required
to pay, or would otherwise be required to pay under Section 6(b), by reason of
such untrue or alleged untrue statement or omission or alleged
omission.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	
              8.  

            	
              Reports Under the 1934
      Act.

            


    

     

    With a
view to making available to the Investors the benefits of Rule 144, in the event
any of the below are required for any Investor to sell any Registrable
Securities the Company shall:

     

    (a)  make and
keep public information available, as those terms are understood and defined in
Rule 144;

     

    (b)  file with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Exchange Agreements)
and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and

     

    (c)  furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144 and the 1934 Act, (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company with the SEC if such reports are
not publicly available via EDGAR, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.

     

    
      	
              9.  

            	
              Assignment of
      Registration Rights.

            


    

     

    The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor’s Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws if so
required; (iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions contained
herein; (v) such transfer shall have been made in accordance with the applicable
requirements of the applicable Exchange Agreement; and (vi) such transfer shall
have been conducted in accordance with all applicable federal and state
securities laws.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      	
              10.  

            	
              Amendment of
      Registration Rights.

            


    

     

    Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders, provided that any
Investor may give a waiver in writing as to itself. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company. No such amendment or waiver (unless given pursuant to the
foregoing proviso) shall be effective to the extent that it applies to less than
all of the holders of the Registrable Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of this Agreement unless the same consideration also is offered to
all of the parties to this Agreement.

     

    
      	
              11.  

            	
              Miscellaneous.

            


    

     

    (a)  Solely
for purposes of this Agreement, a Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from such record owner of such Registrable
Securities.

     

    (b)  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
(iii) with respect to Section 3(c), by electronic mail (provided confirmation of
transmission is electronically generated and kept on file by the sending party);
or (iv) one (1) Business Day after deposit with a nationally recognized
overnight delivery service with next day delivery specified, in each case,
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:

     

    If to the
Company:

     

    Workstream
Inc.

    485 N.
Keller Rd., Suite 500

    Maitland,
Florida 32571

    Telephone:  (407)
475-5500

    Facsimile:  (407)
475-5517

    Attention:  CEO

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    


    With a
copy (for informational purposes only) to:

     

    Cozen
O’Connor

    1900
Market Street

    Philadelphia,
Pennsylvania  19103

    Telephone:
(215) 665-4141

    Facsimile:
(215) 665-2013

    Attention:
Michael J. Heller, Esq.

     

    If to the
Transfer Agent:

     

    American
Stock Transfer and Trust Company 

    59 Maiden
Lane

    New York,
NY 10038 

    Telephone:
(718)  921-8124 

    Facsimile:
(718) 921-8327

    Attention:
Joseph Comito 

     

    If to Legal Counsel:

     

    Greenberg
Traurig, LLP

    77 W.
Wacker Drive, Suite 3100

    Chicago,
Illinois 60601

    Telephone:
(312) 456-8400

    Facsimile:
(312) 456-8435

    Attention:  Peter
H. Lieberman, Esq.

        Todd A. Mazur,
Esq.

     

    If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers
attached to the Transaction Agreement, with copies to such Buyer’s
representatives as set forth on the Schedule of Buyers, or to such other address
and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five
(5) days prior to the effectiveness of such change, provided that
Greenberg Traurig, LLP shall only be provided notices sent to Magnetar Capital
Master Fund, Ltd. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or electronic mail
transmission containing the time, date, recipient facsimile number or electronic
mail address and an image of the first page of such transmission or (C) provided
by a courier or overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

     

    (c)  Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (d)  The
parties hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5
they have chosen that all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of Chicago, Cook County, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

     

    (e)  This
Agreement and the schedules and exhibits attached hereto and the instruments
referenced herein and therein constitute the entire agreement among the parties
hereto solely with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the schedules and
exhibits attached hereto and the instruments referenced herein and therein
supersede all prior agreements and understandings among the parties hereto
solely with respect to the subject matter hereof and thereof.

     

    (f)  Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of
and be binding upon the permitted successors and assigns of each of the parties
hereto.

     

    (g)  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. Unless the context clearly
indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.”  The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.

     

    (h)  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains an electronic file of an executed signature page, such
signature page shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or electronic file signature page (as the case
may be) were an original thereof.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (i)  Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (j)  All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.

     

    (k)  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party. Terms used in this Agreement but defined in the
other Transaction Documents shall have the meanings ascribed to such terms on
the Closing Date (as defined in the Exchange Agreements) in such other
Transaction Documents unless otherwise consented to in writing by each
Buyer.

     

    (l)  This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Persons
referred to in Section 6 and 7 hereof.

     

    (m)  The
obligations of each Investor under this Agreement and the other Transaction
Documents are several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under this Agreement or any other Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Investor pursuant hereto or thereto, shall be deemed to
constitute the Investors as, and the Company acknowledges that the Investors do
not so constitute, a partnership, an association, a joint venture or any other
kind of group or entity, or create a presumption that the Investors are in any
way acting in concert or as a group or entity with respect to such obligations
or the transactions contemplated by the Transaction Documents or any matters,
and the Company acknowledges that the Investors are not acting in concert or as
a group, and the Company shall not assert any such claim, with respect to such
obligations or the transactions contemplated by this Agreement or any of the
other the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of the Company contained was solely in
the control of the Company, not the action or decision of any Investor, and was
done solely for the convenience of the Company and not because it was required
or requested to do so by any Investor. It is expressly understood and agreed
that each provision contained in this Agreement and in each other Transaction
Document is between the Company and an Investor, solely, and not between the
Company and the Investors collectively and not between and among
Investors.

     

    [signature pages
follow]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Second
Amended and Restated Registration Rights Agreement to be duly executed as of the
date first written above.

     

    
      	 
      	
              COMPANY:

               

            
	 
      	
              WORKSTREAM
      INC.

               

               

              By: /s/Michael
      Mullarkey             

                   
      Name: Michael
      Mullarkey   

                   
      Title:   CEO                        

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Second
Amended and Restated Registration Rights Agreement to be duly executed as of the
date first written above.

     

    


    
      	 
      	
              BUYERS:

               

            
	 
      	 
      
	 
      	
               

              /s/____________________________

              By:

              Its:

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
A

     

    FORM OF NOTICE OF
EFFECTIVENESS

    OF REGISTRATION
STATEMENT

     

    _____________________

    _____________________

    _____________________

    Attention:  _____________

     

    Re:           Workstream
Inc.

     

    Ladies
and Gentlemen:

     

     

    [We
are][I am] counsel to Workstream Inc., a corporation existing pursuant to the
Canada Business Corporations Act (the “Company”), and have
represented the Company and its subsidiaries in connection with those certain
separate Exchange Agreements (the “Exchange Agreements”) entered
into by and among the Company and the parties named therein (collectively, the
“Holders”) pursuant to
each of which the Company issued to each of the Holders senior secured
convertible notes (the “Convertible Notes”)
convertible into the Company’s common shares, no par value per share
(the “Common
Shares”). Pursuant to the Exchange Agreements, the Company also has
entered into a Second Amended and Restated Registration Rights Agreement with
the Holders (the “Amended Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Amended Registration
Rights Agreement), including the Common Shares issuable upon conversion of the
Convertible Notes and Common Shares issuable upon exercise of the 2008 Warrants
(as defined in the Amended Registration Rights Agreement), under the Securities
Act of 1933, as amended (the “1933 Act”). In connection with
the Company’s obligations under the Amended Registration Rights Agreement, on
____________ ___, 20__, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the
Registrable Securities which names each of the Holders as a selling shareholder
thereunder.

     

    In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and
[we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the SEC
and the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    This
letter shall serve as our standing opinion to you that the Common Shares
underlying the Convertible Notes and the 2008 Warrants are freely transferable
by the Holders pursuant to the Registration Statement, subject to the prospectus
delivery requirements of the 1933 Act, which the selling shareholders have
agreed to comply with to the extent applicable and which we have assumed
compliance with in issuing this letter. You need not require further letters
from us to effect any future legend-free issuance or reissuance of such Common
Shares to the Holders as contemplated by the Company’s Irrevocable Transfer
Agent Instructions dated _________ __, 20__.

     

     

           Very truly
yours,

     

           [ISSUER’S
COUNSEL]

     

           By:_____________________

    CC:           [LIST NAMES OF
HOLDERS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
B

     

    SELLING
SHAREHOLDERS

     

    The
common shares being offered by the selling shareholders are those issuable to
the selling shareholders upon exercise of convertible notes and warrants. For
additional information regarding the issuance of the convertible notes and
warrants, see “Convertible Notes and Warrants” above. We are registering the
common shares in order to permit the selling shareholders to offer the shares
for resale from time to time. Except for the ownership of the convertible notes
and warrants, the selling shareholders have not had any material relationship
with us within the past three years.

     

    The table
below lists the selling shareholders and other information regarding the
beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder) of the common shares by each of the selling shareholders. The second
column lists the number of common shares beneficially owned by each selling
shareholder, based on its ownership of common shares, the convertible notes and
the warrants, as of ________, 20__, assuming conversion of the convertible notes
and exercise of the warrants held by the selling shareholders on that date,
taking account of any limitations on conversion or exercise set forth
therein.

     

    The third
column lists the common shares being offered by this prospectus by the selling
shareholders.

     

    In
accordance with the terms of a registration rights agreement with the holders of
the convertible notes and warrants, this prospectus generally covers the resale
of the number of common shares issuable upon conversion of the convertible note
and exercise of the warrants, determined as if the outstanding convertible notes
were converted in full (without regard to any limitations on conversion
contained therein) and the outstanding warrants were exercised in full (without
regard to any limitations on exercise contained therein), in each case, as of
the trading day immediately preceding the date this registration statement was
initially filed with the SEC.  Because the conversion price of the
convertible notes may be adjusted, the number of shares that will actually be
issued may be more or less than the number of shares being offered by this
prospectus. Because the exercise price of the warrants may be adjusted, the
number of shares that will actually be issued may be more or less than the
number of shares being offered by this prospectus. The fourth column assumes the
sale of all of the common shares offered by the selling shareholders pursuant to
this prospectus.

     

    Under the
terms of the convertible notes, a selling shareholder may not convert the
convertible notes to the extent such conversion would cause such selling
shareholder or any of its affiliates to beneficially own a number of common
shares which would exceed 4.99% or 9.99% (as applicable) of our common shares.
Under the terms of the warrants, a selling shareholder may not exercise the
warrants to the extent such exercise would cause such selling shareholder or any
of its affiliates to beneficially own a number of common shares which would
exceed 4.99% or 9.99% (as applicable) of our common shares. The number of shares
in the second column reflects these limitations. The selling shareholders may
sell all, some or none of their shares in this offering.  See “Plan of
Distribution.”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

               

              Name of Selling Shareholder

            	
              Number of Common Shares of Owned Prior to
      Offering

            	
              Maximum Number of 
Common Shares to be Sold
      Pursuant to this Prospectus

            	
              Number of Common 
Shares of Owned 
After
      Offering

            
	
              Magnetar
      Capital Master Fund, Ltd (1)

            	 
      	 
      	 
      
	
              [Other
      Buyers]

            	 
      	 
      	 
      


    

    


    (1)  Magnetar
Financial LLC is the investment advisor of Magnetar Capital Master Fund, Ltd.
(“Magnetar Master Fund”) and consequently has voting control and investment
discretion over securities held by Magnetar Master Fund. Alec Litowitz has
voting control over Supernova Management LLC, the general partner of Magnetar
Capital Partners LP, the sole managing member of Magnetar Financial LLC. As a
result, Mr. Litowitz may be deemed to have beneficial ownership (as determined
under Section 13(d) of the Securities Exchange Act of 1934, as amended) of any
shares deemed to be beneficially owned by Magnetar Financial LLC.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    PLAN
OF DISTRIBUTION

     

    We are
registering the common shares issuable upon (i) conversion of the convertible
notes and (ii) exercise of the warrants, in each case, to permit the resale of
these common shares by the holders thereof from time to time after the date of
this prospectus. We will not receive any of the proceeds from the sale by the
selling shareholders of the common shares. We will bear all fees and expenses
incident to our obligation to register the common shares.

     

    The
selling shareholders may sell all or a portion of the common shares beneficially
owned by them and offered hereby from time to time directly or through one or
more underwriters, broker-dealers or agents. If the common shares are sold
through underwriters or broker-dealers, the selling shareholders will be
responsible for underwriting discounts or commissions or agent’s commissions.
The common shares may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,

     

    
      	
              ·  

            	
              on
      any national securities exchange or quotation service on which the
      securities may be listed or quoted at the time of
  sale;

            


    

     

    
      	
              ·  

            	
              in
      the over-the-counter market;

            


    

     

    
      	
              ·  

            	
              in
      transactions otherwise than on these exchanges or systems or in the
      over-the-counter market;

            


    

     

    
      	
              ·  

            	
              through
      the writing of options, whether such options are listed on an options
      exchange or otherwise;

            


    

     

    
      	
              ·  

            	
              ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

            


    

     

    
      	
              ·  

            	
              block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;

            


    

     

    
      	
              ·  

            	
              purchases
      by a broker-dealer as principal and resale by the broker-dealer for its
      account;

            


    

     

    
      	
              ·  

            	
              an
      exchange distribution in accordance with the rules of the applicable
      exchange;

            


    

     

    
      	
              ·  

            	
              privately
      negotiated transactions;

            


    

     

    
      	
              ·  

            	
              short
      sales made after the date the Registration Statement is declared effective
      by the SEC;

            


    

     

    
      	
              ·  

            	
              sales
      pursuant to Rule 144;

            


    

     

    
      	
              ·  

            	
              broker-dealers
      may agree with the selling securityholders to sell a specified number of
      such shares at a stipulated price per
share;

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              ·  

            	
              a
      combination of any such methods of sale;
and

            


    

     

    
      	
              ·  

            	
              any
      other method permitted pursuant to applicable
  law.

            


    

     

    If the
selling shareholders effect such transactions by selling common shares to or
through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the common shares for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  In connection with
sales of the common shares or otherwise, the selling shareholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the common shares in the course of hedging in positions they
assume.  The selling shareholders may also sell common shares short
and deliver common shares covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling shareholders may also loan or pledge common shares to broker-dealers
that in turn may sell such shares.

     

    The
selling shareholders may pledge or grant a security interest in some or all of
the convertible notes, warrants or common shares owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the common shares from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer and donate the common shares in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

     

    The
selling shareholders and any broker-dealer participating in the distribution of
the common shares may be deemed to be “underwriters” within the meaning of the
Securities Act, and any commission paid, or any discounts or concessions allowed
to, any such broker-dealer may be deemed to be underwriting commissions or
discounts under the Securities Act. At the time a particular offering of the
common shares is made, a prospectus supplement, if required, will be distributed
which will set forth the aggregate amount of common shares being offered and the
terms of the offering, including the name or names of any broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the selling shareholders and any discounts, commissions or concessions
allowed or re-allowed or paid to broker-dealers.

     

    Under the
securities laws of some states, the common shares may be sold in such states
only through registered or licensed brokers or dealers. In addition, in some
states the common shares may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.

     

    There can
be no assurance that any selling shareholder will sell any or all of the common
shares registered pursuant to the shelf registration statement, of which this
prospectus forms a part.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the common shares by the
selling shareholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the common shares to engage in market-making activities with
respect to the common shares.  All of the foregoing may affect the
marketability of the common shares and the ability of any person or entity to
engage in market-making activities with respect to the common
shares.

     

    We will
pay all expenses of the registration of the common shares pursuant to the
registration rights agreement, estimated to be $[     ]
in total, including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or “blue sky” laws;
provided, however, a selling shareholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling shareholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling shareholders will be
entitled to contribution. We may be indemnified by the selling shareholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
shareholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to
contribution.

     

    Once sold
under the registration statement, of which this prospectus forms a part, the
common shares will be freely tradable in the hands of persons other than our
affiliates.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
C

     

    WORKSTREAM
INC.

    (the
“Company”)

     

    QUESTIONNAIRE
TO THE SELLING SHAREHOLDERS

     

    This
Questionnaire is to be completed, signed and faxed to Scott Brucker, Esquire at
(215) 701-2410 by no later than fifteen (15) calendar days after the Trigger
Date, by the person or entity indicated on the cover of this Questionnaire (the
“Selling Shareholder”) whose common shares of the Company are being registered
pursuant to a Registration Statement on Form S-3. Retain a duplicate copy for
your files.  If you do not return the Questionnaire by the foregoing
deadline, your shares may not be included in the Registration
Statement.

     

    If you
are uncertain about any of the following questions as they apply to your
situation, please supply all relevant facts.  Include separate sheets
with details if necessary.  If you have any questions, please call
Workstream’s counsel, Scott Brucker, Esquire, at
(215) 665-3710.

     

    Please
notify me immediately if any of the information disclosed in your answers
changes.  Please answer all questions. Indicate “none” or “not
applicable” when appropriate.  Information should be given as of the
date of this Questionnaire, even if previously reported to the
Company.

     

    IN
ANSWERING THESE QUESTIONS, PLEASE REFER TO THE INSTRUCTIONS AT THE BEGINNING OF
THIS QUESTIONNAIRE.

     

    


     

    Name of
Selling Shareholder: _________________________________

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Instructions and
Definitions

     

     
The following instructions and definitions are furnished to aid you in preparing
your answers to this Questionnaire.

     

    
      	
               
      

            	
              1.

            	
              For
      purposes of this Questionnaire the term “Company” means Workstream
      Inc.

            


    

     

    
      	
               
      

            	
              2.

            	
              “Beneficial”
      ownership.  Beneficial ownership shall have the meaning
      ascribed to it in Section 13(d) of the Securities Exchange Act of 1934, as
      amended.  The SEC has taken the position that if you have sole
      or shared voting power or dispositive power or the ability to acquire
      either sole or shared voting or dispositive power of a security within 60
      days, you are the beneficial owner of that security, even though that
      security is not registered in your name.  Thus, for example, you
      could be the beneficial owner of securities in a trust or estate of which
      you are a trustee or executor, or of which you are one of the trustees or
      executors, or you could be the beneficial owner of securities which you
      have a right to purchase.

            


    

     

    
      	
               
      

            	
              3.

            	
              The
      term “affiliate” for purposes of this Questionnaire means any person
      directly or indirectly controlling, controlled by, or under common control
      with the Selling Shareholder.

            


    

     

    
      	
               
      

            	
              4.

            	
              An
      example response has been provided to assist you in preparing your
      response.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.            Broker-Dealer
Status.

    


    (a)           Are
you, or are you an affiliate of, a broker-dealer registered under the Securities
Exchange Act of 1934?

    


    Yes   ____                                                      No   ____

     

    If “yes,”
please give details below.

    


    


    


    


    (b)           Please
confirm the following statement:  The Company’s equity securities that
are being issued to you were acquired in the ordinary course of your business,
and at the time the securities were issued to you, you did not have any
agreement or understanding, directly or indirectly, with any person to
distribute the securities.

    


     
Confirmed   ____                                    Cannot
Confirm   ____

     

    If “cannot confirm,” please give
details below.

    


    


    


    


    2.          
 Relationships
with the Company.

    


    (a)           Have
you held any position or office with the Company, its predecessors or affiliates
within the last three years?

    


    


    Yes   ____                                                      No   ____

     

    If “yes,”
please give details below.

    


    


    


    (b)           Have
you had any other material relationship with the Company, its predecessors or
affiliates within the last three years?

    


    Yes   ____                                                      No   ____

     

    If “yes,”
please give details below.

    


     

    
 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    3.          Equity Securities Owned By
You.

     

    (a)           Please
state the number and type of equity securities of the Company  owned
(please see instructions and definitions on page 2) by you as of the date
of this Questionnaire, including securities which are exercisable or convertible
into equity securities within 60 days of the date of this
Questionnaire.

    


    Class                                                                                             Number
of Shares

    of
Security                                                                                     Owned

    


    


    


    


    


    (b)           If
any natural person or entity other than you holds or shares voting power or
dispositive power with respect to the Company’s equity securities listed in
response to Question 3(a), please provide the names of the natural persons
(including titles) or entities that hold or share such voting power or
dispositive power and indicate the number of the Company’s equity securities
covered thereby.

    


    


    (c)           With
respect to the Company’s equity securities listed in response to
Questions 3(a) and 3(b) for which an entity holds or shares voting power or
dispositive power, please provide the names of the natural persons (including
titles) or entities that control the entity or entities listed in response to
Questions 3(a) and 3(b).

    


    


    


    


    


    


    (d)           Please
continue to list the natural persons or entities that control the entities
listed in response to Question 3(c) and the entities listed in response to
this Question 3(d) until you have listed only natural persons (including
titles) that control the applicable entity or entities.

    


    


    
 

    


    


    (e)           If
any person or entity disclaims beneficial ownership of any of the equity
securities you have listed in response to Question 3, please so
indicate:

    


    


    


    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXAMPLE
RESPONSE

    


    The
following is an example of a response to items 1 through 3.  Please
assume ABC Corporation is the Selling Shareholder for purposes of this
example.

    


    1.           Broker-Dealer
Status.

    


     ABC Corporation is an affiliate
of a broker-dealer because its sole shareholder, DEF Corporation, is a
broker-dealer.

    


    


    2.           Relationships with the
Company.

    


     (a)           ABC
Corporation has not held any position or office with the Company, its
predecessors or affiliates within the last three years.

    


     (b)           ABC
Corporation provided consulting services to the Company in March
2002.

    


    


    3.           
Equity Securities
Owned By You.

    


    Question
3(a).

    


    Class                           Number of
Shares

    of
Security                                                                                       
Owned

    Common
Shares                                                                               
100,000

    


    Warrants
to purchase Common
Shares                                               200,000

    


    Question
3(b).

    


    Not applicable

    


    Question
3(c).

    


    ABC
Corporation is controlled by DEF Corporation, ABC Corporation’s sole
shareholder.

    


    Question
3(d).

    


    DEF
Corporation is controlled by XYZ Corporation, DEF Corporation’s sole
shareholder. XYZ Corporation is controlled by John Doe, XYZ Corporation’s sole
shareholder and its President and Chief Executive Officer.

    
       

    

    Question
3(e).

    


    John Doe disclaims beneficial ownership
of the 100,000 Common Shares and the Warrants to purchase 200,000 Common
Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    The
undersigned hereby acknowledges that the information contained herein is true to
the best of his knowledge and will notify the Company immediately of any changes
in such information.

     

    


     

    


     

    DATED:
__________,
2007                                         FOR INDIVIDUALS:

    


    


    


    __________________________________

    Name of
Selling Shareholder [please print]

    


    __________________________________

    Signature

    


    


    FOR
CORPORATIONS, PARTNERSHIPS OR TRUSTS:

    


    


    


    __________________________________

    Name of
Selling Shareholder [please print]

    


    


    By:
_______________________________

         
Signature


    
 

    Name:
_________________________

                          
 [please print]

    


    Title:
__________________________

                  [please
print]